Resource Commodities

London Metal Exchange aims to ban metal sourced with child labor

The London Metal Exchange could remove companies from its list of approved metal suppliers if they fall short of industry standards following an outcry about cobalt mined by children in Africa, three sources said.

The exchange will issue principles for responsible sourcing in coming months and producers will have to show their metal meets industry standards that conform with the new LME guidelines, the sources familiar with the matter said.

“The LME has to be policeman. It can do that by making sure industry standards on child labor and conflict minerals are being met, that there is auditing and certification,” a source on an LME committee said.

The responsible sourcing of metals such as cobalt has come into focus as manufacturers scramble to secure supplies of the key component in rechargeable lithium-ion batteries ahead of an expected surge in electric car sales.

Carmakers such as Volkswagen have asked suppliers to ensure cobalt does not come from child labor and concern some of the metal in LME approved warehouses may be tainted has led some consumers to shun its contracts.

While there is no single industry-wide standard for responsible mineral supply chains, the Organisation for Economic Co-operation and Development (OECD) has a five-step framework and the Cobalt Institute is developing its own standards.

To make progress on responsible sourcing, the LME sent a survey to producers in November asking about the sourcing, auditing and certification of metal that can be delivered against LME contracts. Responses were due by Dec. 1.

Most have now responded though stragglers will be given a new deadline, possibly the end of the third quarter, or risk being named and shamed, the sources said.

They said the process of establishing the principles, the adoption of specific standards that have to be adhered to and time to allow producers to meet the requirements could take up to two years, or possibly longer.

The spotlight in has also fallen in recent years on tin, another metal traded on the LME that is used in electronics and can come from conflict zones or artisanal mining areas in Africa.

COMES TO A HEAD

The LME declined to comment on the survey responses or whether approved metal brands could be removed from its lists.

“The LME is committed to facilitating the implementation of recognized responsible sourcing standards for its listed producers and expects to issue further guidance on this topic over the coming months,” the exchange said in a statement.

Rights group Amnesty International brought the issue to a head with a 2016 report detailing the use of child labor in artisanal cobalt mines in Democratic Republic of Congo and in 2017 it said some major electronics and car companies were not doing enough to clean up their supply chains.